Meb Faber’s Ivy 10 Portfolio: Expand And Conquer Yale And Harvard

Meb Faber's Ivy 10 portfolio offers better returns than the Ivy 5 portfolio. It bets on alternatives and has global reach. Is the Ivy 10 right for you?

Meb Faber’s Ivy 10 portfolio is an expansion of the Ivy 5 portfolio. The portfolio attempts to mirror the portfolios of large endowment funds like Yale and Harvard. The portfolio of large endowments has been heavily influenced by David Swensen of Yale. His approach is to diversify into alternative asset classes like natural resources (timber), real estate, and private equity. Meb Faber and Eric W. Richardson’s have looked over the shoulders of David Swensen and other fund managers and have constructed the Ivy Portfolio. They present the asset allocation in their book  The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets.

Meb Faber’s Ivy 10 Portfolio: Expand And Conquer Yale And Harvard

Asset allocation piechart for Meb Faber’s Ivy 10 Portfolio

meb-faber-ivy-10-portfolio

Returns and risk for the Ivy 10 portfolio

Portfolio NameNumber of asset classes1 year return 2019YTD (incl. December 2019)10 year returnCAGR since 1989DrawdownRisk Level
S&P 500 (Benchmark)
131.25%31.25%12.97%9.84%-37.71%5 - very high risk
Meb Faber Ivy 10 Portfolio918.52%18.52%6.25%7.75%-33.41%4 - high risk

 

From portfoliovisualizer.com

 

Building the portfolio

Below you can see which mutual funds or ETFs you can use to build the portfolio. They are the best-in-class funds and ETFs for this purpose. They are low-cost index funds that best capture the asset class. Read here how we selected the best funds.

Asset allocation for the Ivy 10 portfolio

  • 10.00%  US Large Cap      (VV)
  • 10.00%  US Small Cap      (VIOO)
  • 10.00%  REITs     (VNQ)
  • 10.00%  International Developed Blend      (VEA)
  • 10.00%  Emerging Markets           (VWO)
  • 10.00%  Total US Bond Market    (BND)
  • 20.00%  Commodities     (DBC / GSG)
  • 10.00%  TIPS       (VTIP)
  • 10.00%  International REITs          (VNQI)

Meb Faber and Eric W. Richardson propose using the following ETFs:

From The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets page 75.

 

Advantages and disadvantages of  the Ivy 10 portfolio

Advantages

  • Simple to understand, 10 funds split equally.
  • Better diversified and more chances to rebalance than the Ivy 5 portfolio. Thereby reducing risk and increasing returns.
  • Global and well diversified
  • Constructed by Meb Faber – a respected financial quant that almost single-handedly has revived market timing.
  • Makes a bet on commodities.
  • You get a portfolio that resembles that of Yale and Harvard. David Swensen of Yale has had astonishing returns using a similar model.

Disadvantages:

  • The bet on commodities may not be desirable.
  • The inclusion of commodities makes the portfolio slightly more expensive due to the higher expense ratio of commodity ETFs.
  • May be too heavy on hard assets such as commodities and REITs (30% in total). They have done great in the past but their performance may not continue.
  • May not be suitable for some as the premise for the endowments holding a similar portfolio is holding the assets “forever”. Private investors do not have forever. Most have between 5-50 years.

Resources

Go here for a rebalance excel worksheet.

Also, be sure to visit the Meb Faber site. It is a wealth of information and inspiration. His podcast is also very good (the first episode is absolutely awesome as he runs down what investing is really about.

Summary and your next steps

The Ivy 10 portfolio is a well-diversified global portfolio that expands on the Ivy 5 portfolio. For the past 10 years, it has performed a little better than the Ivy 5 portfolio.  Implementing the Ivy 10 portfolio gets you in the club with a large endowment like Yale and Harvard.

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